38 Studios' lead board director Thomas Zaccagnino advised others involved with Rhode Island's proposed $75 million loan guarantee to the studio to keep part of its risky financial standing from those approving the guarantee, WPRI reports.
On July 1, 2010, Zaccagnino responded to an email from CEO Jen MacLean, who was concerned that the state might not provide the full $75 million. According to WPRI, she also wrote that she wasn't comfortable telling the state that the funds would be insufficient to cover the full cost of 38 Studios' in-development massively multiplayer online role-playing game Project Copernicus.
As the Rhode Island Economic Development Corporation (now known as the Rhode Island Commerce Corporation) was considering backing the loan guarantee to the studio, Zaccagnino responded to MacLean's email, copying CFO Rick Wester and Michael Corso, a broker involved with the deal.
"I really do not think we should highlight the fact that we might be under capitalized … wont [sic] go over well with the staff or board," Zaccagnino wrote.
The state approved the loan guarantee later that month, but former Red Sox pitcher Curt Schilling's development studio declared bankruptcy in June 2012. Later that year, the state filed suit arguing that those involved in approving the loan were misleading about the associated risks.
Zaccagnino is one of several individuals named in Rhode Island's lawsuit.
In January 2014, Governor Lincoln Chafee's administration submitted legislation designed to encourage settlements. Since then, The Rhode Island Senate the state's House of Representatives passed similar legislation.
Earlier this month, Rhode Island made a $2.4 million payment on interest — the first paid with funds not previously earmarked for the investment. A subsequent report by SJ Advisors concluded that the state's bond rating could be reduced to junk status if it chose not to repay the loan.
You can follow along with the history of 38 Studios' decline and continuing developments in Polygon's 38 Studios StoryStream.